Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Permit the Listing of Binary Options Overlying Key Performance Indicators Reported by Certain Issuers of Stock

SECURITIES AND EXCHANGE COMMISSION [Release No. 34-106659; File No. SR-CBOE-2026-061] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Permit the Listing of Binary Options Overlying Key Performance Indicators Reported by Certain Issuers of Stock October 13, 2026. I. Introduction On June 30, 2026, Cboe Exchange, Inc. (“Exchange” or “Cboe”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act” or “Exchange Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to allow the Exchange to list binary options overlying specified key performance indicators (“KPI(s)”) reported by certain issuers of stock (“binary KPI options”). The proposed rule change was published for comment in the Federal Register on July 15, 2026. 3 On August 26, 2024, pursuant to Section 19(b)(2) of the Act, 4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change. 5 The Commission received comments regarding the proposed rule change. 6 On October 1, 2026, the Exchange filed Amendment No. 1 to the proposed rule change, which replaces and supersedes the original filing in its entirety. 7 The Commission is publishing this notice and order to solicit comment on Amendment No. 1 in Sections II and III below, which sections are being published verbatim as filed by the Exchange, and to approve the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. 8 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 See Securities Exchange Act Release No. 105877 (July 10, 2026), 91 FR 43418. 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 106196, 91 FR 55918 (August 31, 2026). The Commission designated October 13, 2026, as the date by which the Commission shall approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. 6 Comments received are available at: https://www.sec.gov/rules-regulations/public-comments/sr-cboe-2026-061. 7 Amendment No. 1 revises the proposal to: (1) correct errors and add clarifying language to the rule text, including with regard to the Exchange's determination of the at-the-money value for new series listing and the availability only to registered market-makers of a proposed position limit exemption; (2) correct errors and provide additional representations and clarifications in the in the description of the proposal, including with regard to the Options Listing Procedures Plan (“OLPP”) and the Options Price Reporting Authority (“OPRA”) Plan; (3) provide additional description of alternative settlement procedures; (4) provide additional discussion regarding the trading of binary KPI options when trading in the stock of the underlying issuer has been halted; (5) provide additional information regarding how investors may obtain information regarding binary KPI options; and (6) provide a 25,000-contract position limit for binary KPI options. Amendment No. 1 is available at: https://www.sec.gov/comments/SR-CBOE-2026-061/srcboe2026061-1079659-3751188.pdf. 8 The Commission's discussion and findings begin in Section IV. II. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Cboe Exchange, Inc. (the “Exchange” or “Cboe Options”) proposes to amend its Rules to permit the listing of binary options overlying key performance indicators (“KPIs”) reported by certain issuers of stock (“binary KPI options”). The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Commission's website ( https://www.sec.gov/rules/sro.shtml ), the Exchange's website ( https://www.cboe.com/us/options/regulation/rule_filings/cone/ ), and at the principal office of the Exchange. III. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Rules to permit the listing of binary options overlying key performance indicators (“KPIs”) reported by certain issuers of stock (“binary KPI options”). By way of background, binary options are based on the same framework as traditional, standardized options traded on the Exchange, except the payout of a binary option is a fixed amount contingent upon the occurrence of the option being in- or at-the-money rather than an amount based on the degree to which the option is in-the-money. As a result, payout at expiration of a binary option is an all-or-nothing occurrence. Under current Exchange Rules, the Exchange may list binary options on broad-based indexes and the Cboe Magnificent 10 Index. 9 The Exchange proposes to amend its Rules to permit the listing of binary KPI options. Binary KPI options are European-style, cash-settled options contracts listed on an underlying KPI of an issuer. The exercise settlement value of a binary KPI option is determined not by the market price of the issuer's stock, but by whether a specific financial or operating metric that is reported by the issuer in an earnings-related filing submitted to the U.S. Securities and Exchange Commission (the “Commission”) meets or exceeds a pre-specified strike level. 9 See Chapter 4, Section H. First, the Exchange proposes to adopt Chapter 4, Section I (Binary KPI Options) to describe binary KPI options. The Rules in proposed Chapter 4, Section I apply only to binary KPI options. All other Rules apply to the trading of binary KPI options, except as otherwise provided or the context otherwise requires. The Exchange proposes to adopt Rule 4.80 (Definitions). Like other standardized options, binary KPI options have standardized terms that are established by the Exchange. Standardized terms for binary KPI options include the exercise criterion that is the condition or criterion of a binary KPI option, the exercise settlement amount ( i.e., payout amount), the strike price, the expiration date, the settlement type as A.M.-settlement or P.M.-settlement, the exercise style (as European-style), and the requirements used to determine if the KPI condition or criterion of a binary KPI option has been met (the “payout determination” 10 ). The Exchange proposes to establish these terms in new Rule 4.80 and additional provisions related to binary KPI options in proposed Chapter 4, Section I, as described below. 10 This is the term used in the options disclosure document related to binary KPI options (currently pending Commission review) as required by Rule 9b-1 under the Securities Exchange Act of 1934 (the “Act”). The Exchange proposes to define a “binary KPI option” in new Rule 4.80 as a cash-settled option contract listed on an underlying KPI of an issuer with an exercise settlement amount that is established at the creation of the option and with a settlement value that is determined by whether a specific KPI disclosed by the issuer in an earnings-related filing submitted to the Commission meets or exceeds its exercise price. Binary KPI options are paid out if the reported value of the applicable KPI (1) equals or is greater than ( i.e., the payout determination) the exercise price for a call binary KPI option or (2) is less than ( i.e., the payout determination) the exercise price for a put binary KPI option. 11 The Exchange also proposes to provide that unless the context dictates otherwise, the terms underlying security, equity, or index, or any variations of these terms, in the Rules mean issuer KPI for purposes of binary KPI options. 12 11 This is substantially similar to the definition of binary index option in Rule 4.70. 12 Similarly, the proposed rule change amends the definition of “underlying security” in Rule 1.1 to provide that the term “underlying security” (or “underlying”) means “with respect to binary KPI options, the applicable issuer KPI that is the subject of the settlement.” The Exchange proposes to define a “call binary KPI option” as an option contract that returns an exercise settlement amount if the settlement value of the underlying KPI is at or above the exercise price at expiration ( i.e., in- or at-the-money). 13 13 This is substantially similar to the definition of call binary index option in Rule 4.70. The Exchange proposes to define “exercise price” (also referred to as “strike price”) as the value 14 to which the settlement value of the underlying KPI is compared to determine whether the holder of a binary KPI option is entitled to the exercise settlement amount. 15 For binary KPI options, the exercise price is the exercise threshold of an option contract that establishes the number that is compared against the settlement value of the underlying KPI to determine if the cash payout amount ( i.e., the exercise settlement amount) will be paid out. In other words, binary KPI options will have a threshold number as the exercise price that will be used to determine if the exercise criterion of the binary KPI option has been met, in which case the option will be exercised and holders will receive the cash payout amount ( i.e., the exercise settlement amount). For binary KPI options, the exercise threshold will be a number that reflects or is compared to the underlying KPI of the binary option. 14 The value of an exercise price is measured in the applicable units of the KPI (and is scaled, as further discussed below). For example, some KPIs are measured in U.S. dollars while others may be measured in percentages or numbers. 15 This is substantially similar to the definition of exercise price with respect to binary index options in Rule 4.70. The Exchange proposes to define “exercise settlement amount” for binary KPI options as $1 (unless otherwise adjusted pursuant to Rules 4.6 or 4.84 or modified pursuant to the Rules of the Clearing Corporation). While the definition of exercise settlement amount for binary index options in Rule 4.70 provides for a range of amounts that the Exchange determines on a class-by-class basis, an exercise settlement amount of $1 is permissible under that Rule. Specifically, the exercise settlement amount for binary index options equals the exercise settlement value (which must be between $1 and $1,000) times the multiplier (which must be at least 1). Therefore, $1 is currently a permissible exercise settlement amount for binary index options if the Exchange set an exercise settlement value of $1 and a multiplier of 1. The Exchange proposes to define the term KPI (or “key performance indicator”) as a key financial or operating metric disclosed by an issuer in its earnings-related filings submitted to the Commission ( i.e., Form 8-K, Form 10-Q, or Form 10-K, as applicable). The Exchange proposes to define “put binary KPI option” as an option contract that returns an exercise settlement amount if the settlement value of the underlying KPI is below the exercise price at expiration ( i.e., in-the-money). 16 16 This is substantially similar to the definition of put binary index option in Rule 4.70. The Exchange proposes to define “settlement value” as the value of the underlying KPI that is used to determine whether a binary KPI option is in-, at-, or out-of-the-money. 17 The proposed definition specifies that the “settlement value” is the value of the applicable KPI as disclosed in the applicable issuer's earnings-related filing submitted to the Commission on the applicable expiration date (for both A.M.-settled and P.M.-settled binary KPI options). 18 The Exchange designates the applicable KPI and the relevant reporting period (for example, a calendar quarter) at the time of listing a binary KPI option. 17 This is substantially similar to the definition of settlement value with respect to binary index options in Rule 4.70. 18 While the timing of an issuer's official disclosure informs whether the Exchange will establish a binary KPI option as A.M.-settled or P.M.-settled (as further discussed below), the Exchange will use the KPI value included in an issuer's earnings-related filing submitted to the Commission for the applicable reporting period (and not the press release disclosing earnings results, for example) as the settlement value. The Exchange understands, however, these values are generally the same. Proposed paragraph (b) of the settlement value definition provides if the applicable KPI is not reported or is otherwise unavailable on the expiration date, 19 settlement (including any payout of the exercise settlement amount) will occur in accordance with the Rules of the Clearing Corporation. 20 The alternative settlement procedures of the Clearing Corporation (as further discussed below) provide that if the KPI value needed to determine whether a binary KPI option is at- or in-the-money is not available, expiring contracts will be exercised but may result in delivery of an alternative exercise settlement amount. The alternative exercise settlement amount may be the last closing price of the binary KPI option ( i.e., the market valuation of the KPI event), meaning that the alternative exercise settlement amount will be between $0.01 and $1.00, rather than the expected $0.00 or $1.00. For example, if a KPI will not be reported by the KPI issuer, there is expiring open interest on binary KPI options on that KPI, and the last closing price of the binary KPI option was $0.76, the alternative settlement procedures of the Clearing Corporation provide that expiring binary KPI options may be exercised and settle at $0.76 rather than $1.00. If an option closing price is not available or is deemed by CCUS to be unreliable, the exercise criterion for binary option contracts on that KPI event will be deemed to have not been met, and the binary options will expire unexercised and worthless. 19 For example, if an issuer does not report the applicable KPI in its earnings-related filings submitted to the Commission, will not be submitted such a filing for the applicable reporting period, or delays its filing submission to the Commission. 20 The Exchange notes this proposed provision is similar to Rules 4.13(a)(4) and 5.20(e) (which provide that for index options, in various circumstances that may cause values of securities that are components of the index to not be available for calculation of the index at expiration, the values of those securities (and thus the value of the index) will be calculated in accordance with the Rules and By-Laws of the Clearing Corporation). As further discussed below, the Exchange intends to clear binary KPI options through Cboe Clear US, LLC (“CCUS”) and will submit a separate rule filing to update Rules to reflect this. Therefore, references in the proposed Rules and this rule filing to Clearing Corporation mean CCUS. Additionally, proposed paragraph (c) of the settlement value definition states if an applicable KPI is restated after the expiration date and settlement of a binary KPI option, the settlement value (and the exercise settlement amount) of the binary KPI option does not change (as set forth in the Rules of the Clearing Corporation). In other words, the value of the applicable KPI as reported by the issuer on the applicable expiration date is final, and the amount paid (or not paid) at settlement will not change, regardless of whether the KPI is later restated by the issuer. The Exchange proposes to add Rule 4.81 (Designation of Binary KPI Option Contracts) to identify the binary KPI options that may be listed for trading on the Exchange. Pursuant to proposed Rule 4.81(a), the Exchange may from time to time approve for listing and trading on the Exchange any of the following binary KPI options contracts for the following issuers: Company KPI (each financial metric is measured in $ unless otherwise specified) Apple, Inc Earnings per Share: Diluted; Total Net Sales; Net Sales by Category: iPhone; Net Sales by Category: Services; Net Sales by Reportable Segment: Americas; Net Sales by Reportable Segment: Greater China. Advanced Micro Devices, Inc GAAP Diluted Earnings per Share; GAAP Revenue; Net Revenue: Data Center Segment; Net Revenue: Client and Gaming Segment; GAAP Operating Margin (%). Alphabet Inc Diluted net Income per Share; Revenues; YouTube Ads Revenues; Google Cloud Revenues. Amazon.com, Inc Diluted Earnings per Share; Total Net Sales; AWS: Net Sales; North America: Net Sales; International: Net Sales; Net Sales: Advertising Services. Bank of America Corporation Diluted Earnings per Share; Total Revenue, Net of Interest Expense; Net Interest Income; Provision for Credit Losses; Net Income. Citigroup Inc Diluted Earnings per Share; Total Revenue, Net of Interest Expense; Net Interest Income; Total Provision for Credit Losses; Net income. Coinbase Global, Inc Net Income per Share—Diluted; Total Revenue; Transaction Revenue; Total Trading Volume; Subscription and Services Revenue. Ford Motor Company GAAP Earnings per Share—Diluted; Total Revenues; Ford Pro Segment: Revenue; Ford Model e Segment: Revenue; Ford Blue Segment: Revenue. Intel Corporation GAAP Earnings per Share Attributable to Intel—Diluted; Net Revenue; Revenue: Client Computing Group (CCG); Revenue: Data Center and AI (DCAI); Revenue: Intel Foundry; GAAP Operating Margin (%). JPMorgan Chase & Co Earnings per Share—Diluted; Net Revenue—Reported; Net Interest Income; Provision for Credit Losses; Net Income. Marathon Digital Holdings, Inc Earnings (Net Loss) per Share of Common Stock—Diluted; Revenues; Number of Blocks Won (# Bitcoin (BTC)); Energized Hashrate (EH) (# EH/s); Total Bitcoin Holdings (# BTC); BTC Produced (# BTC); BTC Purchased (# BTC). Meta Platforms, Inc Earnings per Share: Diluted; Revenue; Family Daily Active People (DAP) (#); Revenue: Advertising; Operating Margin (%). Microsoft Corporation Diluted Earnings per Share; Revenue; Intelligent Cloud: Revenue; Microsoft Cloud Revenue; More Personal Computing: Revenue. Netflix, Inc Earnings per Share: Diluted; Revenues; United States and Canada (UCAN): Revenue; Europe, Middle East, and Africa (EMEA): Revenue; Operating Margin (%). NVIDIA Corporation GAAP Diluted Earnings per Share; Revenue; Data Center Revenue; Edge Computing Revenue; Automotive Revenue. Palantir Technologies Inc Earnings per Share Attributable to Common Stockholders, Diluted; Revenue; Net Income; Closed Deals of at Least $1 Million (#). Robinhood Markets, Inc Net Income Attributable to Robinhood Common Stockholders: Diluted; Total Net Revenues; Funded Customers (#); Average Revenue per User (“ARPU”); Robinhood Gold Subscribers (#). SoFi Technologies, Inc Earnings per Share Attributable to Common Stockholders—Diluted; Total Net Revenue; Total Net Revenue—Technology Platform; Total Net Revenue—Financial Services; Total Net Revenue—Lending. Space Exploration Technologies Corp Earnings per Share: Diluted; Total Revenues. Super Micro Computer, Inc Net Income per Common Share: Diluted; Net Sales; Gross Margin (%); Cash Flow Used in Operations; Net Income. Target Corporation Diluted Earnings per Share; Net Sales; Food & Beverage Net Sales; Apparel & Accessories Net Sales; Operating Income: Rate (%). Tesla, Inc Net Income per Share of Common Stocks Attributable to Common Stockholders: Diluted; Total Revenues; Total Automotive Revenue; Model 3/Y Production (#); Supercharger Connectors (#); Free Cash Flow. The Walt Disney Company Diluted Earnings per Share; Revenues; Entertainment Subscription Video on Demand (SVOD) Operating Income; Revenues: Experiences; Segment Operating Income: Sports. The Exchange proposes to add Rule 4.81(b) to clarify that binary KPI options are a separate class from other options overlying the stock of the issuer 21 and are a separate class from other binary KPI options with differently underlying KPIs for the same issuer. The Exchange believes this is reasonable given that an individual KPI is the specific underlying of binary KPI options, and generally options with different underlyings ( e.g., different underlying security or index) are different option classes. 21 This is substantially similar to Rule 4.71(b), which provides that binary index options are a separate class from other options overlying the same index. Next, the Exchange proposes to adopt Rule 4.82 (Terms of Binary KPI Option Contracts) to describe the permissible terms the Exchange may establish for binary KPI option series. Proposed Rule 4.82 provides that binary KPI options listed and traded on the Exchange are designated as to expiration date, exercise price, settlement type, exercise style, exercise settlement amount, contract multiplier, and underlying KPI. 22 After approving a particular binary KPI option class for listing and trading on the Exchange, the Exchange from time to time may open for trading series of options in that binary KPI option class. Proposed Rule 4.82(a) states the Exchange may designate the settlement type for binary KPI options as A.M.-settled or P.M.-settled. 23 Binary KPI options for issuers 24 that disclose their earnings results before the open of Regular Trading Hours (“RTH”) on a given trading day are designated as A.M.-settled binary KPI options, and binary KPI options for issuers that disclose their earnings results after the close of RTH on a given trading day are designated as P.M.-settled binary KPI options. The Exchange notes that the proposed concepts of A.M.-settlement and P.M.-settlement for binary KPI options differ compared to traditional options (as well as binary index options), for which “P.M.-settled” generally means that the expiration of an option so designated will settle to the closing price of the underlying security or index value and “A.M.-settled” generally means that the expiration of an option so designated will settle to the opening price of the underlying. While different than how these terms apply to standard and binary index options, the Exchange believes the proposed description of A.M.-settlement and P.M.-settlement appropriately reflects the earnings disclosure practices of issuers. Additionally, while the timing of the event that will determine whether the Exchange designates a binary KPI option as A.M.-settled or P.M.-settled is different than that for traditional options and binary index options, the trading hours on expiration dates for each of A.M.-settled and P.M.-settled binary KPI options are consistent with those of A.M.-settled and P.M.-settled index options (traditional and binary) today. 22 This is substantially similar to Rule 4.72 regarding binary index options. 23 Binary index options (as well as many traditional index options) that may be listed on the Exchange may be designated A.M.-settled or P.M.-settled. 24 The Exchange determines whether an issuer discloses its earnings results before the open or after the close of RTH on a given trading day based on publicly available information regarding the issuer's general disclosure practices. Proposed Rule 4.82(a) further states that the exercise style of binary KPI options is European-style, which is consistent with the rules regarding binary index options. 25 A European-style option may only be exercised on its expiration date. 26 25 See Rule 4.72(a). 26 See Rule 1.1 (definition of European-style option). Proposed Rule 4.82(b) describes permissible expirations for binary KPI options. Specifically, the proposed rule change will permit the Exchange to list binary KPI option series that expire on the date on which an issuer discloses its earnings results (that include the applicable KPI) for the applicable reporting period (such as calendar quarter). The expiration date for a binary KPI option will be the date on which an issuer discloses its earnings results (that include the applicable KPI) for the specified reporting period (such as the date on which an issuer will issue its earnings results press release). The specific expiration date for a binary KPI option series will finalized when an issuer announces the date on which it will disclose its earnings results (that include the applicable KPI) for that reporting period. 27 If that date is a Tuesday, Wednesday, Thursday, or Friday and the Exchange is not open for business on that date, the expiration date will be the first business day immediately prior to that day. If that date is a Monday and the Exchange is not open for business on that date, the expiration date will be the first business day immediately following that Monday. The disclosed KPIs relate to a specific time period (such as a month or calendar quarter), which KPIs an issuer publicly discloses on a date following the end of the applicable reporting period. 28 27 For example, for a binary KPI option series, the Exchange may designate the reporting period for a series to be the fourth quarter of 2026. The expiration date for that series would be the date the applicable issuer establishes as the date it will disclose earnings results for that quarter. In accordance with Rule 1.5(a), the Exchange intends to publish on its public website finalized expiration dates for binary KPI options, as well as update its reference data file for each issuer KPI on which the Exchange lists binary KPI options (as will be described in the Exchange's technical specifications available on its public website), with the specific expiration date for a binary KPI option series once known. The Exchange also plans to provide finalized expiration dates in data files sent to data vendors. 28 While earnings results are often reported with respect to the time period covered by the issuer's earnings release, such as a calendar quarter, certain issuers may disclose results for different time periods. For example, it is possible in an earnings release for an issuer to announce a KPI that covers a calendar month rather than a calendar quarter. While an expiration date for a binary KPI option will be a specific date, as is the case for traditional options and binary index options, the Exchange's proposed designation of expiration dates for binary KPI options will differ to reflect standard issuer disclosure practices. In some instances, an issuer might not establish the specific date on which it will disclose its earnings results for a reporting period until weeks prior to the disclosure date. Consequently, unlike standard equity and index options that have an exact expiration date when strikes are first listed, a binary KPI option will be listed for trading with a placeholder expiration date if the date the KPI information will be released by the issuer is not publicly known. If a placeholder expiration date is required, it will be set as the first trading day following the date of the deadline for the issuer's submission of its earnings-related filing for the reporting period applicable to the series. Once an issuer announces the disclosure date of the KPI information, the expiration date will be updated as the finalized expiration date of the option contract. 29 Ultimately, the expiration date for a binary KPI option is the issuer's earnings disclosure date, even if that date is unknown at the time the series is listed. 29 Issuers have different practices as to when they disclose their earnings results (and when they announce their earnings disclosure dates); however, each issuer's practice is generally consistent and predictable. The Exchange may designate binary KPI option series to expire up to 12 months from the time they are listed and may list up to two expirations at one time for a binary KPI option (per KPI per issuer). The Exchange may open for trading a series of binary KPI options at least one business week prior to the expiration date of a binary KPI option. The proposed permissible expirations for binary KPI options are similar to current Rules regarding binary index options. First, the proposed rule change permits the Exchange to list binary KPI options to expire up to 12 months from the time they are listed. Current rules regarding binary index options permit these expirations, in addition to expirations out more than 12 months up to 36 months from the time they are listed. 30 The proposed rule change also limits the Exchange to list up to two expirations at one time for binary KPI options. Therefore, the proposed scope of permissible expirations for binary KPI options is narrower than that permitted for binary index options under current Rules (as previously approved by the Commission). 30 See Rule 4.72. The proposal to list expirations at least one business week prior to the expiration date of binary KPI option (as well as the proposed language regarding shifting an expiration date to the business day immediately before or after an expiration date that falls on a day the Exchange is not open for business) is substantially similar to current Exchange Rules applicable to short-term equity options series, 31 as well as the rules of another options exchange applicable to binary equity options. 32 The Exchange believes it is appropriate to permit listing of binary KPI options that expire up to 12 months from the time they are listed to accommodate different issuer reporting periods, as well as to permit the Exchange to list expirations for consecutive calendar quarter periods or for a calendar quarter and annual reporting period at the same time. As discussed above, issuers disclose KPIs in their earnings-related filings submitted to the Commission. 31 See Rule 4.5(d). 32 See NYSE American, LLC Section 17, Rule 903ByRDs. Proposed Rule 4.82(c) describes the permissible exercise prices (or strike prices) the Exchange may designate for binary KPI option series. Proposed Rule 4.82(c)(1) describes how the value of exercise prices of binary KPI option series are measured. Specifically, the exercise price of each binary KPI option series will be a fixed amount equal to an underlying KPI value. Because the value of certain KPIs may be very large ( e.g., billions of dollars), the Exchange proposes that the exercise price for a binary KPI option will be the underlying KPI divided by a scaling factor based on the value of the KPI in the issuer's most recent earnings-related filings submitted to the Commission as of the time a binary KPI option class is listed as follows: • If the most recently disclosed KPI value is greater than or equal to one trillion, the exercise price equals that value divided by one trillion ( e.g., for such KPIs, an exercise price of 27.00 is equivalent to a KPI value of 27,000,000,000,000.00); • If the most recently disclosed KPI value is greater than or equal to one billion but less than one trillion, the exercise price equals that value divided by one billion ( e.g., for such KPIs, an exercise price of 112.00 is equivalent to a KPI value of 112,000,000,000.00); • If the most recently disclosed KPI value is greater than or equal to one million but less than one billion, the exercise price equals that value divided by one million ( e.g., for such KPIs, an exercise price of 900.00 is equivalent to a KPI value of 900,000,000.00); • If the most recently disclosed KPI value is greater than or equal to one thousand but less than one million, the exercise price equals that value divided by one thousand ( e.g., for such KPIs, an exercise price of 42.00 is equivalent to a KPI value of 42,000.00); and • If the most recently disclosed KPI value is less than one thousand, the exercise price equals that value and is not divided by a scaling factor ( e.g., for such KPIs, an exercise price of 774.00 is equivalent to a KPI value of 774.00). 33 33 When applying the scaling factor, the Exchange will not round the scaled KPI value and instead will truncate the value to fit the scaled strike price value within standard strike listing format. The Exchange will apply a different scaling factor to newly listed binary KPI option series for a new expiration only after the value of the KPI in the issuer's earnings-related submitted to the Commission has a value in a different scaling tier for four consecutive reporting periods or if the Exchange deems it necessary in the interests of a fair and orderly market. Application of a different scaling factor will not affect the exercise prices of any series of the binary KPI options previously opened. For example, if the Exchange begins listing a new class of binary KPI options and the most recently disclosed KPI value for the issuer at the time of that listing was for the third quarter of 2026 and was $892,000, the exercise prices for that class of binary KPI options will be scaled by 1,000, and thus exercise prices of 895, 995, and 1005, would represent $895,000, $995,000, and $1,005,000, respectively. If the issuer discloses a KPI value of $1,020,000 in its fourth quarter 2026 earnings disclosure, the Exchange will continue to list exercise prices scaled by 1,000. If the issuer then discloses KPI values of $1,112,000, $1,237,000, and $1,064,000 for the first, second, and third quarters, respectively, of 2027, the Exchange will begin scaling the exercise prices by 1,000,000 for the fourth quarter 2027 expirations (or for the first quarter 2028 expirations if the Exchange had already listed fourth quarter 2027 expirations prior to the disclosure of the third quarter 2027 KPI value). The Exchange believes this will permit consistency for listing scaled KPI values while allowing the Exchange to update strike prices to reflect long-term changes to an issuer's KPI values. The Exchange will announce in accordance with Rule 1.5 if the scaling factor applied to a binary KPI options changes (for example, the KPIs will be scaled in billions rather than in millions), including through updates to the Exchange's technical specifications regarding binary KPI options and reference data files that describe the terms of binary KPI options, which will be available on the Exchange's website (customers receive notifications of such updates). This is consistent with how the Exchange provides information regarding product information (including updates) for all options the Exchange lists for trading. 34 34 The binary KPI option contract specifications available on the Exchange's public website will set forth the scaling factor for each binary KPI option. It is possible for a KPI to have a negative value, such as earnings per share (which is equivalent to a loss per share). Proposed Rule 4.82(c)(1)(B) provides the Exchange may list binary KPI options series with exercise prices representing negative KPI values. For these series, the exercise price will equal the absolute value of the KPI and will be scaled as described above. For example, if an issuer's earnings per share in the last reporting period was −$3.52 (and thus was a loss per share), a binary KPI option for such issuer with a strike of 3.58 will reflect an expected loss of $3.58 per share. The Exchange will incorporate into symbology for binary KPI options whether the value of the strike price is positive or negative, including if the Exchange lists binary KPI option series with both positive and negative strike prices. This is similar to current Exchange practice for index options for which the Exchange lists both A.M.-settled and P.M.-settled series—whether a series is A.M.- or P.M.-settled is built into the symbol, each of which could have the same strike prices listed at the same time. Whether a symbol reflects a positive or negative value will be available on contract specifications as well as the reference data file for the specific binary KPI option on the Exchange's public website (in accordance with Rule 1.5). Proposed Rule 4.82(c)(2) provides the minimum interval between strike prices for binary KPI options series is: • 0.01 where the strike price is less than 10; • 0.10 where the strike price is 10 or greater but less than 100; • 1.00 where the strike price is 100 or greater but less than 1,000; • 10.00 where the strike price is 1,000 or greater but less than 10,000; and • 100.00 where the strike price is 10,000 or greater. As discussed above, while KPI values above 1,000 are generally scaled, there may be circumstances in which the Exchange lists strikes above 1,000 or even 10,000 given the Exchange's proposal to maintain a lower scale level until a KPI value is consistently above a certain level ( e.g., above one billion for four consecutive quarters). This may occur when a KPI value is near the top of a scaling range; for continuity, the Exchange will continue listing strike prices using the lower scaling factor and not change to a higher scaling factor until the KPI value is regularly within that higher range (as noted above). Suppose a KPI value is 995,000,000; in this case, strike prices will be scaled by 1,000,000. Thus, the Exchange may list binary KPI options above and below 995 (995,000,000 divided by 1,000,000). However, it is realistic that the KPI may increase to above 1,000,000,000. As proposed, the Exchange may list strike prices, for example, of 1,000 (representing 1,000,000,000) and above, for expirations until the KPI value is above 1,000,000,000 for four consecutive reporting periods. To reduce confusion, the Exchange would not scale strike prices using different scaling factors within a single expiration (and would not change the scale until the KPI value is consistently at the higher level). Therefore, it is possible the Exchange may list strikes greater than 1,000. Similarly, while strikes above 10,000 may be rare, given the Exchange proposes to maintain a lower scale level until a KPI value is consistently above a certain level ( e.g., above one billion for four consecutive quarters, as proposed), depending on market factors and demand, it is possible (although unlikely) the Exchange may determine it is appropriate to list strikes above 10,000 if market factors or expectations signify a significant increase of the KPI value. The proposed strike intervals accommodate the listing of binary KPI options in these circumstances before the Exchange shifts the strike prices for an issuer's KPI to a different scaling level. The proposed strike intervals are generally consistent with current Rules for other options, which provide for larger strike intervals as the values of strike prices increase. Given the scaling factors for larger KPI values, it may appear the proposed rule change will permit smaller strike intervals for larger KPI values if those intervals are considered solely on a nominal basis. However, that is not the case if the actual values of the strike intervals are considered. The corresponding actual value of the strike interval for a strike price that was subject to a larger scale value is higher than the actual value of the strike interval for a strike price that was subject to a smaller scale value. For example, suppose a strike price of 950 represents $950 million. The proposed rule change would permit strike intervals of $1.00. However, that $1.00 corresponds to $1,000,000. In other words, if the Exchange listed strikes of 950, 951, and 952, the difference in the actual value between those strikes is $1,000,000, not $1 ( i.e., the strikes represent values of $950,000,000, $951,000,000, and $952,000,000). Similarly, suppose a strike price of 3 represents $3,000,000,000. The proposed rule change would permit strike intervals of $0.01. However, in this case, that $0.01 corresponds to $10,000,000. If the Exchange listed strikes of 3.00, 3.01, and 3.02, the difference in the actual value between those strikes is $10,000,000, not $0.01 ( i.e., the strikes represent values of $3,000,000,000, $3,010,000,000, and $3,020,000,000, respectively). As a result, the permissible strike intervals between strike prices representing values in the billions are actually larger than the permissible strike intervals between strike prices representing values in the millions. This is consistent with the general premise underlying current strike intervals that larger strike intervals apply to larger strike values. Proposed Rule 4.82(d) describes the initial series of a binary KPI option the Exchange may open for trading. Specifically, the Exchange may open for trading one or more binary KPI option series with a fixed KPI value as the strike price (scaled as described above), with approximately the same number of strike prices being opened above and below the at-the-money KPI value at the time the binary KPI option series are opened. The “at-the-money” KPI value may be the value of the KPI in the issuer's most recent earnings-related filing submitted to the Commission, the issuer's disclosed estimate of the KPI for the next reporting period, or analysts' consensus estimate as reported by major market vendors, as the Exchange deems appropriate based on the most recent market information available to the Exchange. Because KPIs are static values, the Exchange believes it is appropriate to determine strike prices based on all available information that would inform expectations about the KPIs (as investors would do). The Exchange understands that an issuer's previously disclosed KPI, as well as issuer and analyst estimates of the KPI, are primary factors investors may consider when determining in which direction the KPI value may move in the next reporting period (similar to how investors consider the then-current price of an underlying stock when considering their options investment strategies and which direction the stock price may move). Therefore, the Exchange believes using the most recently available of these values is appropriate to use for determining which strikes it should list for a specific issuer KPI. The Exchange believes this flexibility to select the most appropriate at-the-money value is similar to current rules that permit the Exchange to list additional series to maintain an orderly market, to meet customer demand, or when the market price of the underlying security moves substantially. 35 The Exchange believes the proposed definition of at-the-money will allow the Exchange to list series with strike prices that are consistent with investor expectations and demands and that are based on information available in the market. 35 See, e.g., Rule 4.5(d)(4). The Exchange will list strike prices for binary KPI option series that are reasonably close to the at-the-money KPI value at the time of listing. A strike is “reasonably close” to the at-the-money KPI value if (1) for KPIs less than or equal to 1, it is no more than 2; 36 (2) for KPIs greater than 1 and less than or equal to 10, it is no more than 100% above or below the at-the-money KPI value; and (3) for KPIs greater than 10, it is no more than 30% above or below the at-the-money KPI value. The Exchange may also open binary KPI option series that are more than 30% above or below the at-the-money KPI value (if the KPI is greater than 10) if demonstrated customer interest exists for such series, as expressed by institutional, corporate or individual customers or their brokers. 37 36 The Exchange believes this is appropriate given the potentially small values of certain KPIs. For example, suppose the second quarter earnings per share of a company was $0.04. In such a case, if strikes were limited to 100% above this value, the Exchange could only list strikes up to $0.08, which would provide investors with minimal investment options. Therefore, the Exchange believes this provision is appropriate to provide the Exchange with authority to list meaningful strikes for smaller-valued KPIs. 37 See, e.g., Rule 4.5(d)(3) and (4) (permissible series for short term equity option series). It is currently uncommon for the Exchange to list series more than 50% away from the at-the-money value of an underlying security for strikes above 20, as permitted by Rule 4.5(d)(3). The Exchange may add new binary KPI option series when the Exchange deems it necessary to maintain a fair and orderly market or to meet customer demand, and the opening of a new series of binary KPI options on the Exchange will not affect any other series of options of the same binary KPI option class previously opened. 38 The Exchange may list additional series using updated at-the-money KPI values, such as if the Exchange lists binary KPI options series for an expiration before the applicable issuer has disclosed the KPI value in a filing submitted to the Commission for the immediately preceding reporting period and that value is then disclosed in a filing submitted to the Commission or if the issuer or major market data vendors publish estimates of the KPI value. For example, before expiration of a binary KPI option series set to expire on the date of an issuer's disclosure of its third quarter earnings results, the Exchange lists series of that binary KPI option to expire on the date of an issuer's disclosure of its fourth quarter earnings results (using the KPI from the issuer's second quarter earnings results as the at-the-money KPI value). After the issuer discloses its third quarter earnings results in a filing submitted to the Commission, including the applicable KPI, the Exchange may list additional series for the fourth quarter binary KPI options using the third quarter KPI result as the at-the-money KPI value. Suppose, further, that after the issuer discloses its third quarter earnings results, the issuer publishes an estimate of the fourth quarter KPI value. As investors may see this estimate (and possibly factor it into their investment decisions), the Exchange may determine it is appropriate to consider this estimate the “at-the-money” value and list additional strikes above and below this value. Any additional strike prices the Exchange lists will be reasonably close (as defined above) to the at-the-money KPI value at the time of listing. 38 Rule 4.72(c) also provides that additional series of a binary index option may be opened for trading on the Exchange when the Exchange deems it necessary to maintain an orderly market or to meet customer demand, and that the opening of a new series of binary index option on the Exchange will not affect any other series of options of the same class previously opened. Continuing the above example, suppose the Exchange lists binary KPI options for the fourth quarter before the binary KPI options for the third quarter have expired. As proposed, the Exchange would list strikes above and below the at-the-money strike, which at the time of listing may be the settlement value KPI from the issuer's second quarter earnings results disclosure (the most recently available KPI). If the KPI for the option was net sales, and the second quarter value was $45.093 billion, the at-the-money strike would be 45.10, and the Exchange could list strikes within 30% of that value, and additional series based on customer demand or market changes. After the Exchange lists those series, the issuer discloses its third quarter earnings results, including net sales of $57.241 billion. As proposed, after that disclosure, the Exchange may list additional strikes within 30% of $57.24 to reflect the change in value of the underlying (as well as additional series based on customer demand or market changes). This proposed framework for listing and adding series is similar to the framework in current Rules for listing and adding series of equity options. 39 While the proposed strike intervals are narrower than these rules, the permissible ranges are also narrower. The Exchange acknowledges the proposed framework would permit the Exchange to list many strikes per KPI per expiration. However, the Exchange intends to apply its standard strike listing practices to binary KPI options. Specifically, the Exchange generally lists strikes at wider intervals as they move farther away from the at-the-money value, while listing more granular intervals for strikes closer to the at-the-money value. The Exchange also generally delists granular strikes that are deep out-of-the-money if the Exchange determines they are sufficiently covered by wider strike intervals that are close in value. 39 See, e.g., Rule 4.5(d)(3) and (4). These proposed provisions regarding the listing of binary KPI option series are similar to provisions regarding permissible series of other options. The Exchange believes it is reasonable to list binary KPI options for a new reporting period prior to the expiration of then-listed binary KPI options for the immediately preceding reporting period ( e.g., listing binary KPI options for the fourth quarter before expiration of binary KPI options for the third quarter), and thus before the settlement value of the applicable KPI is known for the immediately preceding reporting period for these options, to permit investors to roll positions from one expiration to the next. As proposed, once the settlement value for the immediately preceding reporting period is known (the third quarter in this example), the Exchange may list additional series of the binary KPI options that reflect that KPI value. This is consistent with current practice if there is a change (including a substantial change) in the price of an underlying security or value of an underlying index. For example, Rule 4.5(d)(4) permits the Exchange to open additional series of a short-term option series overlying a security when the market price of the